INTRODUCTION

The recently enacted Electricity Act of 2023 in Nigeria is a key landmark in the ongoing efforts of the country to reform and reinvigorate its power industry. These efforts have been going on for quite some time. The Electricity and Power Sector Reform Act of 2005 has been superseded by the new legislation, which lays out a complete legal and institutional framework to direct the operation of a privatized, contract-based competitive power market.

This review explores the background, objectives, and key features of the new Electricity Act, highlighting its potential to attract private sector investments, accelerate power generation capacity, and promote sustainable energy practices.

BACKGROUND

Inadequate generation capacity, transmission bottlenecks, and limited access to electricity are just some of the issues that have plagued Nigeria’s power sector for a long time. The Nigerian government has embarked on a series of reforms, the culmination of which was the enactment of the Electricity Act of 2023, with the goal of addressing these concerns and driving sectoral development. 

This new legislation seeks to build a stable legal and regulatory framework for a competitive energy market. If successful, the legislation will encourage investment, improve efficiency, and broaden access to reliable power across the country. The earlier reform act of 2005 laid the groundwork for the progress that has been accomplished since then.

MAJOR FEATURES

1. Comprehensive Legal Framework: The Electricity Act establishes a comprehensive legal framework to guide the operation of a privatized, contract-based competitive electricity market in Nigeria. It sets out clear rules and regulations to ensure fair competition, market transparency, and consumer protection, while also encouraging private sector investments throughout the power value chain. 

The Nigerian Electricity Regulatory Commission (NERC) is empowered under Section 34 of the new Electricity Act to protect consumer interests and promote industry standards for quality. It gives the NERC the authority to guarantee reasonable prices, a sufficient supply, and dependable electricity delivery to customers. The part also stresses how crucial it is to preserve service quality, security, and safety in the generation and distribution of power. The Act seeks to establish a fair and open regulatory framework for all parties participating in the electrical industry by placing a strong priority on consumer protection and upholding high standards.

2. Integration of Renewable Energy: Recognizing the importance of renewable energy sources, the Act integrates renewable energy into Nigeria’s energy mix. Solar, wind, hydro, and other renewable energy sources are considered crucial for sustainable power generation. The Act, as seen in Section 1, promotes policies and regulatory measures to scale up efficient generation, transmission, and distribution capabilities in order to achieve national electricity access targets and increase per capita power consumption.

3. Decentralized Power Generation: In Nigeria, the new Electricity Act has measures that support programs for decentralized power generation. As seen in Section 63(2), it eliminates the requirement for a license for the building, ownership, and operation of electricity generating and distribution facilities that are smaller than predetermined capacity levels. By building smaller-scale power generation initiatives, this clause promotes participation in the energy industry by people, businesses, and communities. The Act intends to improve energy accessibility, dependability, and efficiency at the local level by decentralizing power generation.

4. Combating Electricity Theft: The Electricity Act addresses this problem, classifying it as a serious offense. According to the provisions in Sections 209-224 of the Act, behaviors that result in electricity theft, waste, or equipment damage include bypassing electrical wires or tampering with meters. For engaging in these illegal activities, offenders risk jail time and fines. With the help of this clause, the power system’s integrity will be preserved, and consumers will receive an equitable and trustworthy distribution of electricity.

5. State-Level Regulation: The Act as seen in Section 2(2c) and Section 63(7) gives states the right to control their electricity markets by granting permits to private investors to run power plants and mini-grids within their borders. However, it limits the distribution of electricity across state and international borders. Currently, Lagos, Edo, and Kaduna states have already passed legislation governing the energy market, allowing them to autonomously manage their local markets. States without such laws will be subject to NERC regulation.

6. Renewable Generation Obligations: Electricity generation licensees are obligated to meet renewable generation obligations as prescribed by NERC. This requirement demonstrates a commitment to increasing the share of renewable energy in the overall energy mix, promoting sustainable practices, and reducing reliance on fossil fuel-based power generation. The Act encourages and incentivizes the adoption of renewable energy technologies by power generation companies.

7. Institutional Framework for Regulation and Management

The Act establishes essential oversight and regulatory institutions for the Nigerian Electricity Supply Industry (NESI). First, the National Electricity Regulatory Commission (NERC) is charged with promoting market transparency and ensuring equitable competition. NERC plays a vital role in regulating market participant activities, establishing tariffs, and enforcing compliance with industry standards. Responsibilities of the commission include monitoring and enforcing renewable generation obligations imposed on licensees for electricity generation.

The second step is the establishment of the Nigerian Electricity Liability Management Company (NELMCO) in Section 6(d) of the Act to administer the liabilities of the former Power Holding Company of Nigeria (PHCN). NELMCO assures a seamless transition from the old electricity market structure to the new market structure. It assumes responsibility for legacy issues, including delinquent debts, contractual obligations, and any financial or legal liabilities associated with the PHCN.

In addition, the Act in Section 173(1) establishes the Nigerian Electricity Management Services Agency (NEMSA) to assure the NESI’s safety, security, and dependability. NEMSA is responsible for supervising the technical standards, inspection, and certification of electrical equipment, personnel, and installations. NEMSA seeks to improve the overall performance and dependability of the power sector infrastructure by enforcing compliance with safety standards and promoting good industry practices.

POTENTIAL CHALLENGES AND CONSIDERATIONS

In Nigeria, the successful implementation of the new Electricity Act of 2023 presents potential obstacles and considerations. This section highlights critical considerations that may affect the effective implementation of the provisions of the Act. There is a need for robust implementation strategies, adequate financing, the removal of barriers to the integration of renewable energy, and a competitive electricity market. In order to harness the transformative potential of the Act and achieve a sustainable and consumer-centric power sector in Nigeria, it will be essential to overcome these obstacles.

1. Implementation Challenges: The effective implementation of the new Electricity Act’s provisions is a prospective concern. Historically, the Nigerian electricity sector has struggled with the enforcement and implementation of policies and regulations, which has impeded its growth and development. To achieve the desired results, it will be essential for the government to ensure that the provisions of the Act are effectively implemented, with explicit monitoring, enforcement, and accountability mechanisms.

2. Funding Concerns: The availability of funds for the implementation of the Act is an additional prospective concern. The Act proposes significant investments in expanding power generation capacity, enhancing transmission networks, and bolstering distribution capacities. The successful implementation of these initiatives will depend on securing adequate funding for their support. To attract the necessary capital for the sector’s growth, the government will need to investigate various financing options, including public-private partnerships, international collaborations, and investment incentives.

3. Renewable Energy Challenges: The provisions of the Act regarding the integration of renewable energy sources into Nigeria’s energy balance may face obstacles. The high cost of renewable energy technologies and the lack of infrastructure to support their implementation may hinder their widespread adoption. The government should establish favorable policies and incentives to promote the development of renewable energy, such as feed-in tariffs, tax incentives, and grants, in order to address this issue. Additionally, it will be essential to invest in the expansion of renewable energy infrastructure, such as solar farms and wind parks, in order to maximize the potential of renewable resources.

4. Challenges in establishing a Competitive Market: Due to the dominance of certain players in the Nigerian electricity sector, the Act’s provisions regarding the establishment of a competitive electricity market may encounter obstacles. Effective regulation and oversight will be necessary to ensure a level playing field and equitable competition for all parties while protecting consumer interests. The government must remain vigilant regarding the prevention of anti-competitive practices, the promotion of market transparency, and the development of an environment that encourages new entrants and investment.

It will be crucial for the successful implementation of the new Electricity Act to address these prospective issues. By prioritizing effective implementation, securing sufficient funding, promoting renewable energy development, and fostering fair competition, the Nigerian government can overcome these obstacles and drive the transformation of the power sector toward a more sustainable, accessible, and consumer-centric future.

CONCLUSION

The new Electricity Act of 2023 introduces a number of significant provisions that contribute to the growth of a competitive, sustainable, and consumer-centric power sector in Nigeria. By providing a comprehensive legal framework, promoting the integration of renewable energy, combating electricity theft, empowering state-level regulation, and imposing renewable generation obligations, the Act aims to attract private investments, improve efficiency, and guarantee a reliable and accessible electricity supply for all Nigerians. These provisions demonstrate the government’s dedication to driving sectoral transformation and achieving long-term energy objectives, while protecting consumer interests and promoting sustainable practices.

In addition, the Act contains a number of notable provisions that contribute to the growth of a dynamic and sustainable power sector. The Act lays the groundwork for a competitive, consumer-centric, and environmentally conscious power sector by promoting decentralized power generation initiatives, integrating renewable energy sources, establishing regulatory frameworks, and establishing key institutions for effective oversight and management. These provisions demonstrate the government’s dedication to driving sectoral transformation, enhancing energy access, and attaining long-term sustainability objectives. The Act recognizes the significance of decentralized power generation and encourages the participation of individuals, businesses, and communities in the power sector. It emphasizes the integration of renewable energy sources such as solar, wind, hydro, and other renewables, recognizing their critical role in long-term sustainability and carbon emission reduction.

Overall, the new Electricity Act of 2023 is a major step towards establishing a robust and sustainable power sector in Nigeria. With its comprehensive legal framework, emphasis on renewable energy, measures to combat electricity theft, empowerment of state-level regulation, and establishment of key oversight and management institutions, the Act paves the way for private sector investments, increased efficiency, and dependable electricity access. It is consistent with the government’s vision for sectoral transformation and the achievement of long-term energy objectives, while assuring consumer protection and promoting sustainable practices in the Nigerian power sector.